Two news items from United Airlines. First, Oscar Munoz will be back soon. Second, three new independent members to the Board have been appointed. Is there a link?
Munoz is already back in a decision-making capacity but will resume his CEO role on a full-time basis on March 14, 2016. In a press release he stated:
I am thrilled to return full-time to a job and the employees I love. Since September when I became CEO, our team has been focused on our employees, improving the operation and the customer experience, and the results are starting to show. In fact, over the past several months United has emerged as a top performer in on-time arrivals and completion factor among our largest industry peers. I am grateful to our 85,000 aviation professionals around the world at United for running such a great airline and taking care of our customers.
Our progress isn’t just limited to the operation. Financially, we have been performing well. United’s 2015 earnings were one of the best in the Company’s history, and we made significant progress shrinking the margin gap with our closest competitors, strengthening our balance sheet, and returning significant cash to shareholders. United spent $1.2 billion repurchasing shares in 2015 and plans to spend $1.5 billion on share repurchases in the first quarter of 2016. We have a lot of positive momentum, but this is just the beginning. There is significant work underway and we see substantial upside yet to come.
A couple thoughts. Oscar should not be patting himself on the back for record profits considering the era of consolidation and low oil prices we are in. I continue to be optimistic that when Munoz says “there is significant work underway and we see substantial upside yet to come” he means it. We’ve already seen improvements in in-flight premium cabin dining, illy coffee, free food for top elites in economy class, and snacks for everyone in economy class.
News also came today that United has added three new “highly qualified independent directors” to the Board. The three men do have airline experience, James Kennedy indirectly with GE, Robert Milton with Air Canada and US Airways, and James Whitehurst with Delta. Here’s a bit more on each board member–
James Kennedy, 62, is the former President and Chief Executive Officer of T. Rowe Price Group, Inc., a global investment management organization which provides mutual funds, sub-advisory services, and separate account management. During his tenure, T. Rowe more than doubled its assets under management, which increased from $335 billion at the end of 2006 to $763 billion as of December 31, 2015. Prior to his appointment as President and Chief Executive Officer in 2006, Mr. Kennedy served in roles of increasing responsibility at T. Rowe since 1978, including VP & Director of the Equity Research Division beginning in 1997. He has been a director of T. Rowe since 1987. Prior to joining T. Rowe, Mr. Kennedy participated in the Financial Management training Program at General Electric. He graduated from Princeton University with a BA degree and Stanford University with an MBA. He is a recipient of the Stanford University Graduate School of Business Excellence in Leadership Award.
Robert Milton, 55, was Chairman and Chief Executive Officer of ACE Aviation Holdings Inc., and was Chairman, President and Chief Executive Officer of Air Canada. Having joined Air Canada in 1992 in a consulting capacity, Mr. Milton moved from the role of Senior Director of Scheduling to Vice President, Scheduling and Product Management, Senior Vice President, Marketing and In-Flight Service and Executive Vice President and Chief Operating Officer. Mr. Milton became President and Chief Executive Officer of Air Canada in 1999. He is currently the lead director of Air Lease Corporation, a director of the Smithsonian National Air and Space Museum, and a trustee of the Georgia Tech Foundation Inc. Mr. Milton was a past director of US Airways, Inc., and was also a past Chairman of the Board of Governors of IATA (The International Air Transport Association). Mr. Milton graduated from the Georgia Institute of Technology with a BS in Industrial Management.
James Whitehurst, 48, is President and Chief Executive Officer of Red Hat, Inc., a leading provider of open source enterprise IT products and services. Since joining Red Hat in January 2008, he has more than tripled the company’s revenue from $523 million to $1.8 billion, while more than tripling the company’s stock price. Under his leadership, Red Hat was named to Forbes’ list of “The World’s Most Innovative Companies” in 2015, 2014, and 2012; added to Standard and Poor’s 500 stock index in 2009; and named one of the best places to work by Glassdoor in 2014. Prior to Red Hat, Mr. Whitehurst spent six years at Delta Air Lines, Inc., where he managed airline operations and drove significant international expansion as Chief Operating Officer. Mr. Whitehurst helped put the company back on firm footing as it emerged from bankruptcy in 2007. Before Delta, he held several corporate development leadership roles at The Boston Consulting Group, with clients across a wide range of industries. Mr. Whitehurst currently serves on the Board of DigitalGlobe, Inc. In June 2015, Whitehurst published a book with Harvard Business Review Press entitled “The Open Organization: Igniting Passion and Performance” showing how open principles of management, based on transparency, participation, and community, can help organizations navigate and succeed in a fast-paced connected era. He is a graduate of Rice University with a BA in Computer Science and has an MBA from Harvard Business School.
To make room for the new board members “certain current directors will step down from the Board at or in advance of the 2016 Annual Meeting”. It will be interesting to see which ones those are.
The key takeaway is that United continues to shed its past way of doing business and after Smisek’s reign of terror, we should all be encouraged. All three new boardmembers appear totally non-controversial and able to offer diverse strengths, exactly what you want in a board. The buck still stops with Munoz and as he readies his return, I trust that United will carefully weigh how it can balance its fiduciary duty to shareholders to maximize profit with the opportunity it has in this “honeymoon period” to win back or maintain disgruntled passengers.